TripAdvisor Plunges After Quarterly Revenue Misses Estimates

Shares of TripAdvisor (TRIP) plunged in afternoon trading after the company reported quarterly revenue that fell below consensus estimates.

WHAT'S NEW: After the market close yesterday, TripAdvisor reported third quarter adjusted earnings per share of 53c, which beat analysts' consensus estimates of 52c, though its revenue of $421M fell below the $436.31M analysts were expecting. User reviews and opinions grew nearly 50% year-over-year in the quarter and reached 435M at September 30, covering roughly 1.05M hotels and accommodations, 830,000 vacation rentals, 4.2M restaurants and 730,000 attractions and experiences, the company said in a statement. Looking ahead, TripAdvisor also said that it expects adjusted EBITDA margin to be lower in fiscal 2017 than in fiscal 2016, adding that in 2017, the company's focus will shift to re-accelerating revenue growth in its hotel business.

WHAT'S NOTABLE: Meanwhile, Priceline (PCLN), which competes with TripAdvisor in some areas of online travel booking, reported better-than-expected results for Q3 on Monday, with EPS and revenue beating consensus expectations and gross travel bookings rising 25% year-over-year. Following the earnings beat, multiple analysts maintained bullish ratings on Priceline and increased their price targets on the shares, including Piper Jaffray analyst Michael Olson, who noted that Priceline is well positioned to capture an increasing share of travel bookings in its core international markets.

STREET RESEARCH: The same Piper Jaffray analyst lowered his price target on TripAdvisor to $70 from $90 following TripAdvisor's quarterly results, but maintained an Overweight rating on the stock. Olson said that the roll-out of Instant Book has "clearly not been seamless" for TripAdvisor or investors, but noted that the trajectory of Instant Book is improving and could lead to higher hotel shopper monetization and create stronger long-term economics for the company. In addition, RBC Capital Markets analyst Mark Mahaney, who yesterday kept an Outperform rating on Priceline, maintained a Sector Perform rating on TripAdvisor and lowered his price target on the shares to $50 from $55, saying that Instant Book dilution and Mobile Monetization challenges remain. The analyst said he was "incrementally more cautious" on the stock, which is "still a great asset with a risky strategy."

PRICE ACTION: In afternoon trading, TripAdvisor slipped 17.1% to $52.30. Shares are down nearly 39% year-to-date.

OTHERS TO WATCH: Priceline and Expedia (EXPE) are both lower this afternoon.